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CFPB Settles Credit Report Allegations With Company for $8 Million

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By Jeff Bater

Dec. 3 — A credit
reporting company accused of mishandling consumer information must
improve the way it investigates disputes and pay an $8 million fine
under a settlement with the Consumer Financial Protection Bureau
(CFPB).

The agency took action against Clarity Services
Inc., a Clearwater, Fla., company that compiles and sells credit
reports to financial service providers, such as payday lenders. The
firm, which the agency says focuses on the subprime market, was
accused of violating the Fair Credit Reporting Act (FCRA).

The law requires that access to consumer reports be
limited to those with a “permissible purpose.” The CFPB said it
found that Clarity violated the FCRA by illegally obtaining the
consumer reports of tens of thousands of consumers — without a
permissible purpose — from other credit reporting companies. The
CFPB alleged Clarity used personal consumer information from the
reports to help market its products.

The agency also alleged the company failed to
investigate consumer disputes, including disputes relating to
credit inquiries, even though it was aware that some consumer files
were populated with information from unreliable sources.

Cleaning Up Business

CFPB Director Richard Cordray said credit reporting
plays a critical role in consumers’ financial lives and that the
bureau is holding the company accountable for cleaning up the way
it does business.

Clarity Services put out a news release
acknowledging the settlement, in which the company neither admitted
nor denied findings of fact or conclusions of law.

“While we do not agree with the CFPB's allegations,
the settlement allows Clarity Services to move beyond this
distraction,” said Tim Ranney, the company's president. “We are
focused on delivering innovative solutions and excellent service to
our customers. The settlement will not affect that level of service
or Clarity's level of pricing, innovation or technology
platform.”

Helping Reduce High-Risk
Lending

In its release, the company characterized itself as
“the leading provider of real-time fraud detection and credit risk
management solutions.” Clarity said it is a credit reporting agency
that provides information to providers and develops “efficient and
effective data reporting products to help businesses reduce
high-risk lending.”

“Clarity's growing database provides information
that is not available from traditional reporting agencies, and
assists lenders in gaining a competitive advantage by viewing
subprime consumer data,” the news release said.

CFPB Order

The CFPB said the company must cease its allegedly
illegal business practices, which include pulling consumer reports
and selling or reselling consumer reports to users who lack a legal
purpose, such as lead generators and those companies that are
considering purchasing any service from Clarity.

The firm is also required to improve consumer
safeguards by implementing policies to ensure users have a
permissible purpose to obtain consumer reports and are
appropriately credentialed. It must also require consumer data
furnishers to provide accurate data and correct data
inaccuracies.

In addition, Clarity has to have procedures in place
to ensure investigations are conducted when it is informed of a
consumer dispute, including disputes about unauthorized credit
inquiries.

To contact the reporter on this story: Jeff Bater in
Washington at jbater@bna.com

To contact the editor responsible for this story:
Seth Stern at sstern@bna.com

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